US Dollar Motionless Ahead of Bernanke's Speech on Inflation

The US dollar remained almost squarely unchanged on a slow day of summer trade, with an empty calendar providing little reason to force noteworthy movements in price. The trade-weighted dollar index was flat at 81.43, while the Euro was similarly unmoved at $1.3620. Meanwhile, the British Pound once again flirted with multi-decade highs, adding 60 points to $2.0160 on higher-than-expected inflation numbers. The Canadian dollar likewise continued its ascent against its US namesake, scaling fresh 30-year peaks against the downtrodden Greenback.

There was no significant US economic data through the New York afternoon, with a later Consumer Credit report unlikely to cause volatility across USD pairs. Traders will look forward to later-week Advance Retail Sales and University of Michigan Consumer Confidence numbers to guide economic outlook for the world?s largest economy. Likewise of note, there will be a number of key speeches in the coming days. Fed Chairman Ben Bernanke will speak on Inflation at 17:00:00 GMT Tuesday?a market mover regardless of surrounding context. Markets are likely to react to any significant changes in the outlook for price pressures in the US economy.
Domestic stock markets moved slightly higher through New York afternoon trade, with the Dow Jones Industrial Average up 51 points to 13,663.30. The S&P 500 rose for the fifth consecutive day at +1.33 to 1,531.77, while the tech-heavy NASDAQ composite was 3.25 points firmer to 2,669.76. Traders cite expectations of strong earnings growth as the primary driver for share advances; Alcoa Corp will be the first of the Dow?s 30 members to report second quarter earnings at the day?s close. Its shares moved 1 percent to 42.15 on optimistic consensus forecasts for growth. Overall indices clearly benefited during Q1 earnings season, with profits for the S&P 500 growing almost three times analyst estimates on a quarter-over-quarter basis. It will be very important to watch the coming weeks of reports, with the future of US equity returns dependent on the evolution for corporate profitability. As we have cited in the past, the stock market performance is highly correlated with the very popular foreign exchange carry trade?leaving implications of uncertainty on the future for forex market movements.
Fixed income markets saw some relief, as investors bought bonds as yields rose to fresh multi-week highs. The US 10-year Treasury note added 7/32 points to 95, leaving yields 3 basis points lower to 5.15 percent. A continued retracement in bond yields could send the dollar to retest recent lows, with major currency pairs within striking distance of significant highs against the USD.